Message-ID: <3199259.1075859674685.JavaMail.evans@thyme> Date: Tue, 7 Nov 2000 02:04:00 -0800 (PST) From: issuealert@scientech.com Subject: CEOs Speak on the Strategic Importance (or Lack Thereof) of Information Technology in the Energy Industry Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: "IssueAlert" X-To: X-cc: X-bcc: X-Folder: \Mark_Haedicke_Dec2000_1\Notes Folders\Notes inbox X-Origin: Haedicke-M X-FileName: mhaedic.nsf http://www.consultrci.com ********************************************************************* Energy Exchanges Online - Scottsdale - December 4-6 B2B e-commerce has revolutionized commodity trading, the A&D process and procurement within the energy industry. With heavyweight keynotes and in-de= pth panel discussions this is the first event to bring the major energy compani= es, net markets, venture capitalists, regulatory bodies, investment banks and analysts together to thrash out why its not business as usual but business online. For more information please visit www.eyeforenergy.com/xonline ********************************************************************* =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SCIENTECH IssueAlert, November 7, 2000 from Phoenix, AZ CEOs Speak on the Strategic Importance (or Lack Thereof) of Information Technology in the Energy Industry By: Jon T. Brock, Director, Strategic and Competitive Intelligence =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Four CEOs participated in a panel entitled the "CEO Mega Panel: View From the Top" at the 48th annual EEI/AGA Energy Information Technology Conferenc= e in Phoenix this week. The moderator was Charles Bayless, former chairman, president and CEO of Illinova. The remaining three CEOs included: Keith Stamm, CEO, Aquila Energy; Dr. Matthew Cordaro, president and CEO, Midwest ISO; and James Pignatelli, chairman, president and CEO, UniSource Energy. ANALYSIS: This panel was diversified in a very interesting manner. The conference organizers did a good job in getting a cross-section of the energy industry in transition. The trading organization specialist was represented with Aquila, the ISO specialist was represented with the Midwes= t ISO, and the vertically integrated utility was represented with UniSource Energy. Each panelist was asked what role information technology (I/T) played in their respective organization. Their answers may surprise you. Dr. Matthew Cordaro of the Midwest ISO went first. Dr. Cordaro stressed that I/T was very critical to the operation of an ISO, saying "it is=20 essentially the foundation of the ISO." He mentioned that the Midwest ISO had started from scratch and would have to be able to handle hundreds of thousands of transactions every week in a real-time operation. Among the=20 responsibilities that the Midwest ISO is entrusted with are: monitoring the congestion on the grid and taking appropriate action, preventing gaming through market monitoring, settlement processing (who owes who what), and handling the dispute process. The Midwest ISO signed a contract with the Regional Transmission Organizati= on (RTO) Alliance on July 20 of this year to deliver an integrated control center system (ICCS) that, when complete, will provide $50 million in=20 infrastructure for the MISO. The RTO Alliance, which consists of ALSTOM ESCA Corporation of Seattle, Open Access Technology International (OATI) of Minneapolis, Perot Systems of Dallas, Texas, and TenFold Corporation of Salt Lake City, Utah, will deliver an electricity transmission system that will enable MISO to match electricity demand with available transmission. The hardware and software in the ICCS project will support MISO's operational functions including transmission planning, reservation, scheduling, real-time monitor= ing and control, settlement and billing. Dr. Cordaro also stated that Lodestar was involved in the MISO and that communications had been outsourced to AT&T Solutions. Keith Stamm of Aquila Energy went next. Keith began by clarifying Aquila's focus as trading: owning very little assets in a high-volume, low-margin, high-volatility business. I/T is very important in the trading business. Real-time information must be known and disseminated appropriately to the right individuals. Keith believes that one of Aquila's strategic asset= s and strengths is its risk management system. Aquila strives for a real-tim= e calculation of risk. Aquila Energy, a subsidiary of UtiliCorp United, Inc., has been a surprisin= g winner in the trading marketplace this year, showing a 113-percent growth since last year with $9 billion total revenue for the past six months, of that $55 million in trading revenue compared to $18 million in 1999. The EBIT was $34.2 million vs. $9 million a year ago. Aquila has gathered top traders and intellectual, financial, and risk management personnel to enthusiastically participate in the power marketing race. Keith mentioned a recent alliance with five other companies =01* including top traders AEP and Duke Energy =01* as an investment step Aquila perceived was necessary to keep pace with trader tycoon Enron and other online tradin= g platforms. The Energy Trading Consortium (Duke Energy, AEP, Aquila Energy, Reliant Energy, Southern Company Energy Marketing and El Paso Energy) is in progress to create an exchange that the participants hope will reap benefits from the transaction cost, liquidity, volume and speed of exchange= . This consortium differentiates itself from EnronOnline by bringing many buyers and sellers to the platform as opposed to one-to-many. Another competitor recently launched is e-Speed's TradeSpark. James Pignatelli of UniSource Energy went last and had some controversial statements concerning information technology. James stated that I/T in the vertically integrated utility is not strategic, at least not at the present time. James believes that I/T will become strategic someday (in the deregulated market). James claims getting frustrated with platform switching in the I/T arena. He mentioned pulling in his I/T folks and saying, "Let's switch the=20 distribution network to DC power and once the public has bought new appliances, we'll switch back to AC." While James' comments may have been controversial with the more than 500 attendees and approximately 50 energy CIOs in the audienc= e, he does have a point. The vertically integrated utility's core strength is to generate power and distribute it to "captive" customers reliably. While some I/T systems (like outage management and SCADA devices) may be strategic in this sense, the other parts of I/T are questionable and could be candidates for outsourcing. James claims to be working on B-2-B and B-2-C initiatives at the moment. His vision for B-2-C is a smart chip in the residence that has access to instantaneous pricing information. The residence will "buy" electricity for itself from the most efficient supplier and it will be able to reduce load, thereby reducing the T&D utility to a simple conduit for service. James and Charles Bayless both were involved in New Energy Ventures prior to its sale to AES. In 1997, Tucson Electric invested $3 million in NEV and Charles Bayless (then Tucson Electric's chairman, president and chief executive officer) and James Pignatelli (Tucson Electric's senior vice president and chief operating officer) served on New Energy Venture's=20 administrative committee. It is interesting to view the different parts of the energy marketplace as it unbundles and the profound impact that is occurring on the associated I/T systems. If one were to stop and think about it, deregulation could not occur without the complex I/T systems that are employed today in the marketplace. I wonder what Thomas Edison and Samuel Insull would have thought about an unbundled electric marketplace. It is, in fact, undoing their design of an integrated electric system constructed for operational efficiency. =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D See SCIENTECH's exclusive products and services at: http://www.consultrci.com =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let us know if we can help you with in-depth analyses or any other SCIENTECH information products. If you would like to refer a colleague to receive our free, daily IssueAlerts, please reply to this email and include their full name and email address or register directly at: http://www.consultrci.com/web/infostore.nsf/Products/IssueAlert Sincerely, Jon T. Brock Director, Strategic and Competitive Intelligence jbrock@scientech.com =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Feedback regarding SCIENTECH's IssueAlert should be sent to=20 jbrock@scientech.com =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SCIENTECH's IssueAlerts are compiled based on independent analysis by=20 SCIENTECH consultants. 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